by Alexandra Grose

Created on: June 11, 2008

Becoming a successful share trader will require lots of reading. You'll not only need to learn how to make money when the market rises, but also how to make money when the market falls. For added safety it's a good idea to learn about trading options.

Learn the basics of the fundamentals, learn how to read the charts, learn about candlesticks. Learn how to spot a company that is about to rise, and how to hedge your trade in case it goes against you. How to buy to go up, but trade an option to go down, so you're covered either way.

Understand how volume changes price. Volume that is four times larger than normal, that shows up at a new high or low, can indicate a change of direction, especially if it's in conjunction with other indicators.

Learn about those other indicators, the Bollinger bands, MACD lines, moving averages, momentum, RSI, stocastics and market depth. Learn put and call options. Watch how the news can affect share prices.

Paper trading is a way to practice without using real money. Some companies offer virtual accounts where you can trade with an account, but not use actual money. A little like playing monopoly, only with shares. Keep a journal, so you have a record of what you've done right, or wrong.

Once you're familiar with the terminology, work out a plan and paper trade it. If your plan doesn't give you regular success, change the plan. Work on it until you have a 70% to 80% success rate. Then you're ready to go live.

Going live brings other elements into play. Those elements being emotions - fear and greed. Once you go live your heart rate increases. You wonder whether you've made the right choice, you start to second guess all the work you've done to bring you to this point. If the trade doesn't do exactly what you thought it would, fear takes hold and you sell.

You sell too early and the market changes direction and now you wish you'd hung on a little longer. This is why you have a written plan. You have a plan for buying and for selling. If you don't follow a plan and the market moves up, greed starts to set in.

You hang on past your profit taking point, when you know you should sell. You think that this is great, your making a nice profit. You hang on, even though your criteria tells you to sell. You wait another day.

The market turns and you start to loose the profit you've made. You think this is just a slight fall and you decide to hang on for another day. The trade is now going against you and you are looking at a loss. You tell yourself

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